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Jel Classification:D12 

Working Paper
The Cyclicality of Sales, Regular and Effective Prices: Comment

Coibion, Gorodnichenko, and Hong (2015) argue that the CPI underestimates the deceleration in consumer prices during economic downturns because the index fails to account for the reallocation of consumer spending from high- to low-price stores. We show that these authors' measures of inflation with and without store switching suffer from several methodological deficiencies, including an excessive truncation of price adjustments and the lack of a treatment for missing observations. When we address these deficiencies, the authors' key regression results no longer suggest that greater store ...
Finance and Economics Discussion Series , Paper 2015-52

Working Paper
Liquidity Crises in the Mortgage Market

Non-banks originated about half of all mortgages in 2016, and 75% of mortgages insured by the FHA or VA. Both shares are much higher than those observed at any point in the 2000s. We describe in this paper how non-bank mortgage companies are vulnerable to liquidity pressures in both their loan origination and servicing activities, and we document that this sector in aggregate appears to have minimal resources to bring to bear in a stress scenario. We show how the same liquidity issues unfolded during the financial crisis, leading to the failure of many non-bank companies, requests for ...
Finance and Economics Discussion Series , Paper 2018-016

Working Paper
Measuring Mortgage Credit Availability : A Frontier Estimation Approach

We construct a new measure of mortgage credit availability that describes the maximum amount obtainable by a borrower of given characteristics. We estimate this "loan frontier" using mortgage originations data from 2001 to 2014 and show that it reflects a binding borrowing constraint. Our estimates reveal that the expansion of mortgage credit during the housing boom was substantial for all borrowers, not only for low-score or low-income borrowers. The contraction was most pronounced for low-score borrowers. Using variation in the frontier across metropolitan areas over time, we show that ...
Finance and Economics Discussion Series , Paper 2017-101

Working Paper
Borrowers in Search of Feedback : Evidence from Consumer Credit Markets

We study recent technological innovation in credit markets and document their role in providing information to households. We show that households value the ability to learn detailed information about their cost of credit. This function is most valued by less creditworthy households with less experience in credit markets. To measure the demand for information provision we exploit a quasi-natural experiment in an online consumer credit market. A large lending platform unexpectedly switched from pricing loans through an auction mechanism to centralized pricing determined by broad credit grade. ...
Finance and Economics Discussion Series , Paper 2017-049

Working Paper
On Intergenerational Immobility : Evidence that Adult Credit Health Reflects the Childhood Environment

Using a novel dataset that links socioeconomic background to future credit, postsecondary education, and federal student loan and grant records, we document that, even though it is not and cannot be used by credit agencies in assigning risk, background is a strong predictor of adult credit health. A relationship remains upon inclusion of achievement, attainment, and debt management metrics. These findings reveal a new dimension along which childhood circumstances persist into adulthood and imply that the many important contexts in which credit scores are relied upon to evaluate individuals ...
Finance and Economics Discussion Series , Paper 2017-032

Working Paper
The Effects of Mortgage Credit Availability : Evidence from Minimum Credit Score Lending Rules

Since the housing bust and financial crisis, mortgage lenders have introduced progressively higher minimum thresholds for acceptable credit scores. Using loan-level data, we document the introduction of these thresholds, as well as their effects on the distribution of newly originated mortgages. We then use the timing and nonlinearity of these supply-side changes to credibly identify their short- and medium-run effects on various individual outcomes. Using a large panel of consumer credit data, we show that the credit score thresholds have very large negative effects on borrowing in the short ...
Finance and Economics Discussion Series , Paper 2016-098

Working Paper
The Determinants of Subprime Mortgage Performance Following a Loan Modification

We examine the evolution of mortgage modification terms obtained by distressed subprime borrowers during the recent housing crisis, and the effect of the various types of modifications on the subsequent loan performance. Using the CoreLogic LoanPerformance dataset that contains detailed loan level information on mortgages, modification terms, second liens, and home values, we estimate a discrete time proportional hazard model with competing risks to examine the determinants of post-modification mortgage outcomes. We find that principal reductions are particularly effective at improving loan ...
Finance and Economics Discussion Series , Paper 2015-6

Working Paper
How Much Are Car Purchases Driven by Home Equity Withdrawal?

Previous research indicates that changes in housing wealth affect consumer spending on cars. We find that home equity extraction plays only a small role in this relationship. Consumers rarely use funds from equity extraction to purchase a car directly, even during the mid-2000s housing boom; this finding holds across three nationally representative household surveys. We find in credit bureau data that equity extraction does lead to a statistically significant increase in auto loan originations, consistent with equity extraction easing borrowing constraints in the auto loan market. This ...
Finance and Economics Discussion Series , Paper 2015-106

Working Paper
Are Millennials Different?

The economic wellbeing of the millennial generation, which entered its working-age years around the time of the 2007-09 recession, has received considerable attention from economists and the popular press. This chapter compares the socioeconomic and demographic characteristics of millennials with those of earlier generations and compares their income, saving, and consumption expenditures. Relative to members of earlier generations, millennials are more racially diverse, more educated, and more likely to have deferred marriage; these comparisons are continuations of longer-run trends in the ...
Finance and Economics Discussion Series , Paper 2018-080

Working Paper
Monetary Policy and Birth Rates: The Effect of Mortgage Rate Pass-Through on Fertility

This paper examines whether monetary policy pass-through to mortgage interest rates affects household fertility decisions. Using administrative data on mortgages and births in the UK, our empirical strategy exploits variation in the timing of when families were eligible for a rate adjustment, coupled with the large reductions in the monetary policy rate that occurred during the Great Recession. We estimate that each 1 percentage point drop in the policy rate increased birth rates by 2 percent. In aggregate, this pass-through of accommodative monetary policy to mortgage rates was sufficiently ...
Finance and Economics Discussion Series , Paper 2020-002

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